Pending Home Sales Stabilize

A gauge of upcoming home sales ticked slightly higher in January after plummeting in December, a sign of stabilization for a sector grappling with unusually cold weather.

Bloomberg News

The National Association of Realtors said Friday its seasonally adjusted index of pending sales of existing homes rose 0.1% in January from the prior month to 95. That was less than economists’ forecast of an 1.4% increase but the first rise since June, when the index hit a six-year high. In December, it fell 8.7% from November to its lowest level in more than two years.

“The relatively flat reading in January is the first positive sign from pending home sales in several months,” said Michael Gapen, an economist at Barclays.

The pending home sales tallied by the realtors’ trade group typically translate into sales of existing homes one or two months later. The Commerce Department reported earlier this week that sales of new homes, which make up a much smaller portion of the housing market, surged in January to their highest level since July 2008.

Most recent data on the housing sector and broader economy has been weaker than expected, though economists and policymakers think the readings might be distorted by unusually cold and stormy weather over the last couple of months.

Federal Reserve Chairwoman Janet Yellen said Thursday that Fed officials would be tracking the data carefully in the coming weeks to estimate whether it warrants a shift in their relatively positive outlook for the economy. The central bank is in the process of winding down a bond-buying program designed to stimulate growth.

Lawrence Yun, chief economist of the National Association of Realtors, said that factors which dampened December pending home sales were also at play in January. “Ongoing disruptive weather patterns in much of the U.S. inhibited home shopping,” he said. “Limited inventory also is playing a role, especially in the West, while credit remains tight and affordability isn’t as favorable as it was a year ago.”

The realtors’ index of pending home sales for January fell in the West, despite relatively benign weather conditions in that region.

A separate report from the Commerce Department Friday showed that a decline in residential investment subtracted nearly one third of a percentage point from economic growth in the fourth quarter of 2013.

Fueled by historically low mortgage rates and steady job growth, the housing rebound has been a key engine of the broader economic recovery for much of the last couple of years.

The rebound began to slow in the second half of 2013 as mortgage rates began to rise and soaring prices for housing sidelines many prospective buyers.

The average rate for a 30-year fixed-rate mortgage rose to 4.37% in the week that ended Feb. 27 from 4.33% in the prior week, according to a Thursday report by Freddie Mac. A year ago, the 30-year rate was at 3.51%.

Other data for January showed cold winter weather putting a chill on both home sales and home building. Existing home sales fell by 5.1% last month, while housing starts tumbled by 16% to their lowest level since September.

About Real Time Economics

Real Time Economics offers exclusive news, analysis and commentary on the U.S. and global economy, central bank policy and economics. Send news items, comments and questions to the editors and reporters below or email realtimeeconomics@wsj.com.